EnvironmentalReport

Towards Kyosei between People and Nature

Company Profile As of December 31, 1999Name: Canon Inc.Representative: Fujio Mitarai, President and C.E.O.Sales: ¥1,482.4 billionCapital: ¥164.0 billionNet income: ¥59.1 billionEmployees: 21,023 *1

Main products: Copying machinesLaser beam printersBubble Jet printersChemical products (toners and cartridges)CamerasVideo camcordersSemiconductor equipmentBroadcast equipmentMedical equipment

*1 Including temporary staff

Canon Group (Consolidated)Net sales: ¥2,622.3 billionEmployees: 81,009Capital expenditure: ¥200.4 billion *2

R&D investment: ¥177.9 billion *2

*2 Figures are inclusive of regions outside of Japan in accordance withU.S. Securities and Exchange Commission (SEC) standards.

Optical equipment and other 5.3%

Copying machines25.9%

Cameras 12.9%

Computer peripherals50.4%

Information & telecommunications5.5%

Canon Inc. Sales by Product (1999)

Japan28.8%

Other 8.1%

Americas34.8%

Europe28.3%

Canon Group Sales by Region (1999)

Contents1 Message from the President2 Environmental Charter3 Major Objectives in Moving toward the 21st Century4 1999 Main Activities and Environmental Performance6 Environmental Accounting8 Global Environment Assurance Structure

12 Global Environment Assurance Activities� 14 Eco-Product Development and Design� 18 Eco-Production� 25 Eco-Sales� 26 Recycling� 32 Eco-Technology Development� 38 Eco-Products� 43 Eco-Information Disclosure

44 1999 Environmental Performance Data� 45 Targets & Results� 46 Japan Region: Environmental Management

Performance of Operational Sites� 47 Overseas Regions: Environmental Management

Performance of Operational Sites� 48 Global Warming Prevention Measures� 49 Resource Conservation� 50 Elimination of Hazardous Chemical

Substances � 53 Risk Management� 54 Product Recycling� 56 Personnel Involved in Environment-rerated

Work, Training and Industrial Safety57 Eco-Contribution and Awards 58 Canon Envitonmental Report

–The Locations of the Plants and Offices Surveyed59 Chronology of Environment Assurance Activities60 Mini-Glossary of Environmental Terms

Questionnaire

1

In 1996, Canon established the

Excellent Global Corporation Plan.

Based on the philosophy of kyosei, or

living and working together for the

common good, we have challenged

to innovate the management to

become one of the excellent global

corporate group. Our approach

towards the environment is an

important part of the concept,

whose fundamentals are to

integrate environment and management by “maximizing resource efficiency” in

all of our business activities. We have carried out various measures such as

implementing a global recycling program, developing technology and providing

products that are environmentally conscious and zero waste activities.It is said

that the 21st century will be the “Age of IT Industry” as well as the “Age of

Global Environment”. We will make our best effort to contribute to the solutions

for global environment issues by minimizing the consumption of global resources

and the load on the environment by maximizing resource efficiency. With our

group’s collective effort, we will continue to challenge to become a corporation

that is esteemed by the people worldwide also in the area of environment

preservation, by further development of the technology which we have

accumulated to date.

Fujio MitaraiPresident and C.E.O.Canon Inc.

Message from the President

2

Environmental Charter

Philosophy and Environmental GuidelinesIn 1993, we established the Environment Assurance Philosophy and EnvironmentAssurance Guidelines based on kyosei, our corporate philosophy. In the EnvironmentAssurance Guidelines, we declared EQCD Policy in which environment assurancecomes before all business activities, and all Canon Group as one have been headingfor a corporate activity in which the first priority is given to environment assurance.

Corporate Philosophy “Kyosei”

Environment Assurance PhilosophyWe aim to help achieve sustainable economic development and harmony between the

environment and corporate activities to contribute to worldwide prosperity and happiness.

Environment Assurance Basic GuidelinesBased on the EQCD Policy of harmonization between the environment and its business activities,Canon is actively promoting innovative and dynamic environment assurance-related action plans.

1. Actively develop environment assurance technologies for product development, manufacturing, recycling and evaluation, and to disseminate such technologies throughout society.

2. Conduct environmental impact assessments prior to product development/design. Minimize products’ impact on the environment by promoting energy/resource conservation and recycling.

3. Promote energy/resource conservation and waste reduction to minimize the impact on the environment of R&D, manufacturing and sales activities.

4. In procuring resources for business operations, give priority to materials, parts and products that have a comparatively low impact on the environment.

5. Examine whether the Group’s environment assurance activities are practiced appropriately in line with corporate ethics and social rules and are contributing continuously to the reduction of the Group’s impact on the environment.

6. Work together actively with international organizations and government bodies on environmental strategies.

7. As a good corporate citizen, actively support social and local community activities for environmental conservation.

8. Implement Groupwide efforts to boost awareness of environmental conservation among Canon employees through training and education.

9. Pursue environment assurance activities that are transparent and supported by corporate ethics. Actively share environment-related information with others.

EQCD PolicyE: Environment-Companies incapable of environment assurance do not deserve to continue operations.Q: Quality-Companies that manufacture products of poor quality do not deserve to sell them.C: CostD: Delivery

-Companies that fail to meet cost and delivery requirements do not deserve to compete.

3

Major Objectives in Moving toward the 21st CenturyCanon in 2001

Products● Canon will improve the energy and resource efficiency of its products by

35% (1998 base).● Canon will recycle, reduce and reuse more than 90% of its used products.

Production● Canon’s production sites will work to prevent global warming by

improving energy efficiency (energy consumption to net sales) by 30% and by eliminating emissions of gases that exacerbate global warming, such as PFCs, HFCs and SF6.

● Canon operational sites will work toward reducing their industrial waste, after the final process, to less than 5% of 1990 levels.

Sales● Canon will improve its distribution efficiency by 5%, thereby contributing to a

reduction of CO2 emissions.● Canon will work to eliminate packaging of large products (mid- to high-speed

copying machines and laser beam printers) when shipping within regions.

Multi-Activity● Throughout its products, services and activities, from research and development

to manufacturing and sales, Canon will work to eliminate substances hazardous to people and nature, including lead, mercury and chlorinated organic solvents.

● Canon will disclose environmental information about its products and operational sites.

● As a good corporate citizen in every region in which it operates, Canon will actively cooperate with local organizations in environmental protection activities.

Canon

Emission of Chemical SubstanceTotal Emission: 1,000 tons

Development and Design● Promoting energy conservation

designs (on-demand fixing)● Enhancing resource conservation

(designs for reuse)● Enhancing elimination of hazardous

substances (lead-free products (lenses), etc.)

Social Contribution● Clean Earth Campaign (U.S.A.)

● Canon Global Environment Beautification Campaign (Canada) ● WWF Preservation Partner (Europe) etc.

Recycling (ratio of recycling)● Copying Machine 87%● Toner Cartridge 100% (Canon Dalian)● Bubble Jet Cartridge 97% (Japan)● Stretch Film 50 tons● Polystyrene Foam 474 tons

Technology Development ● Ozone-free electrical charging technology ● Technology making VOCs harmless ● Research of eco-polymers● Research of light-reactive water

Manufacturing● Eliminating PFCs, HFCs and SF6

(except certain usages)● Increasing zero-waste sites (27 sites)● Implementing complete water circulation

system (Oita Canon Materials Inc.)● Reducing emissions of hazardous chemical

substances by 40% (compared to 1996)

Information Disclosure ● Products Type III eco-label 11 models ● Publishing Ecology & Environmental Report ● Disclosing environmental data on Web site

Sales & Marketing● Establishing and operating collected copying machine

exchange center with other manufacturers in the same industry● Collecting copying machines, 128,000 worldwide● Collecting toner cartridges, 12,175 tons worldwide● Collecting Bubble Jet cartridges, 9 tons in Japan

* The figures are only for Japan. We have not yet obtained all the figures, however we are planning to disclose them all when they are ready.

Canon as it is now *Emission of Carbon DioxideTotal Emission: 150,000 tC (Production)This emission of carbon dioxide can be converted into the annual usage of electric power of 390,000 people in Japan

Material Resin, Steel Plate: 130,000 tons Other

EnergyElectricity: 850,000 MWhGas: 1,2540,000 m3Oil: 30,000 klWater: 5,900,000 m3 Discharge

Waste: 2,000 tonsWastewater: 4,580,000 m3

CollectionProducts: 74,000 tons (estimated)Packaging Material: 200 tons

ProductsCustomers

1999 Main Activities andEnvironmental PerformanceIn 1999 Canon promoted its challenges for environmental preservation mainly in energy and resource conservation and theelimination of hazardous substances as well as in information disclosure. In connection with our products, we have enhanced thetechnology for conserving energy (on-demand fixing) and established sandwich molding as recycling technology. Also in connectionwith manufacturing, we have made many achievements such as the implementation of totally closed systems in plants forwastewater, dramatic reductions in emissions of chemical substances, and development of VOCs processing technology.We have also started disclosing environmental information on our copying machines and Bubble Jet printers, by attaching our Type III eco-label, which is a first in Japan. Along with this we are issuing Environmental Reports as well as disclosing environmental data on our Website, which leads us to better information disclosure. (Refer to the Performance Data from Page 44)

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6

Environmental Accounting

Environmental Accounting at CanonWe started our environmental accounting in 1983 by obtaining the figures for the costof pollution prevention. At that time, the items that we could get hold of were onlypartial. Since we thought it was important to know how much corporate managementresources, such as people, materials and money should be invested in, we haveextended and systemized the range to be counted since 1991. For 1999, we made anenvironmental accounting study team within the company and worked on the figuresin accordance with the Environment Agency’s Guideline, “For Establishment ofEnvironmental Accounting”.

The result of 1999 Environmental Accounting● Cost calculationsThe equipment investment in 1999 was 3.4 billion yen which was 3% less than thatof the previous year. Since the adjusted amount in accordance with EnvironmentalAccounting Guideline was estimated at 400 million yen, the actual reduction became14%. This result was contributed by the fact that the environmental investment innew sites was settled for the time being. On the other hand, the cost was 3% morethan that of the previous year after adding 1.5 billion yen due to the change ofcalculation method.● Calculation of EffectWe have made two kinds of calculation of the effect; the environmental conservationeffect (based on physical amount) and the economic effect from the measuresimplemented for environmental conservation. However, since it is difficult to calculatethe effect from all the costs of environmental conservation, we have decided to reportonly on the items for which the calculation of the actual effect is possible. The economiceffect, in accordance with the environmental conservation measures, is 1.9 billion yen,based on calculations of the actual amount from the effect in 1999. In order to achievethis effect, it cost us a total of 800 million yen for improvement and depreciation, andwe are satisfied with the fact that a sufficient investment effect was obtained.Although we calculated the indirect effect, such as the effect of risk circumvention andcontribution to profit using Canon’s own method, we are not making reports on themsince the social consensus seems not yet sufficient.

Future Development We think environmental accounting is an effective tool for successful combination ofthe environmental assurance activities and the corporate management, and the issueis how to bring forward the accounting from now on. We are expanding the areassubjected to accounting to the research and development of environmentallyconscious products, the field of product recycling and all the Canon sites includingoverseas operational sites.

7

1999 Environmental Accounting Total Effect Comparison Format (For report Chart C)

About CalculationThe total of 43 business sites in Japan (domestic operational sites listed on page 58) were subject to the calculations.As for the research and development, the calculations were limited to the clear costs for the environmental measures,(recycling, elimination of hazardous substances, eco-materials, etc.)As for the development of environmentally conscious products and recycling products, we have decided not to make any reports this time. (a calculation method is under review)Period of calculations: January 1, 1999 - December 31, 1999

Environmental Cost at Overseas Operational SitesThe cost of overseas operational sites was calculatedusing our traditional method.

EffectEnvironment Conservation Effect

Detail Environmental Load Index

Environmental Load Item 1999 Emission

CO2 *1 151,892 (tC) 27% reduced

Chemical substance *2 1,037 (tons) 29% reduced

Final waste 2,295 (tons) 25% reduced

Usage of water 5,900,000 m3 15% reduced

*1 Energy and non-energy CO2*2 1,968 kinds of substance that Canon controls

Economic Effect related to Environmental Conservation Measures (100 millions of yen)

Detail of Effect Amount

Income earned by recycling waste 1.6

Cost reduction by energy conservation 6.5

Processing cost reduction by recycling waste 3.3

Cost reduction by increasing logistics efficiency 7.2

Total 18.6

● Definition of Effect Estimation1. The effect of the investment in 1999.2. The effect caused by the depreciation in 1999.3. The gain from the sales of hard-assets related to reduction, separation,

recycling of waste.

(Millions of yen)

Investment Cost for this period

Americas 60 60

Europe 4 39

Asia 70 231

Total 134 330

Comparisonindex to 1998rate of change

CostCost for Environment Conservation (100 millions of yen)

Field Contents Investment Cost

(1) Cost within business sites 31.8 56.6

1. Pollution Prevention Cost Air, Water, Soil, etc. 11.6 31.4

14.7 4.4

5.5 20.8

0.1 0.8

1.3 20.6

0.7 4.2

0.5 4.4

(6) Environmental Damage Cost Soil remediation 0.0 0.1

Total 34.4 86.7

● Definition of Cost Calculation1. In accordance with the Environment Agency’s Guideline, calculations were

made for each item by site.2. All the costs for observance of the laws related to environment are included.3. When costs are paid for environmental purposes combined with other costs,

the actual cost is calculated by deducting the costs for other purposes.4. If the portion paid for other purposes is not clearly defined, then a closest

estimate of 0%, 25%, 50%, 75% or 100% will be applied.5. The 1999 depreciation of equipment investment is posted as an expense.

2. Global EnvironmentConservation Cost

Greenhouse effect, energyconservation, logistics efficiency, etc.

3. Resource CirculationCost

Efficient usage of resource, reduction,separation and recycling of waste, etc.

(2) Upstream &Downstream Cost Green procurement, etc.

(3) Management ActivityCost

Environmental education, environmentmanagement system, managerial laborcost, etc.

(4) Research &Development Cost

Research and development for reductionof the load on the environment

(5) Social Activity CostGreening measures, environmentalinformation disclosure, environmentalads, etc.

Effect inOperational Sites

8

The focus on environment assurance spans the entire Canon Group. For this reason,we are pursuing a single global ideal in Japan, the Americas, Europe, Asia andOceania, in every industrialized and developing country, at all of our development,production and sales sites, and throughout our headquarters, subsidiaries and affiliated companies.

Emphasizing practicality and with a focus on the 21st century, ourorganization (including our business divisions) and the Canon Group committees are working together on environment assurance activities under the motto ofnetworking, speed and quality.

Global Environment AssuranceStructureNetworking, Speed and Quality

Global Environment Assurance Structure

Environment Assurance Structure

(Activities of the Organization)

Global Cooperation(Canon Group Committees)

Environment InformationNetwork

Environment Assurance Structure

9

Global Environment Assurance Structure

Environment Assurance Structure Established for R&D, Production and Salesin each Company

Manufacturing companies worldwide (Environmental management and technology improvement)Sales and marketing companies worldwide (Environmental management and recycling promotion)

ManagementPresidentEnvironment Assurance Director

Headquarters

Business Groups and Operational Sites

Subsidiaries and Affiliated Companies

Environment Engineering Center (Planning, management and development)Design for Manufacturing Engineering Center (Environmental assessment of products)Procurement Management Center (Green procurement)Canon Research Center (Eco-polymers)

Business planning centers(Environmental planning and management)Development centers (Environmental technology development for products)Quality assurance centers (Environmental assessment of products)Plants(Environmental management and technology improvement)

Canon considers environment assurance to be an important management issue. Wehave assigned a director responsible for overseeing environment assurance andestablishing unified plans. To make environment assurance activities a continuing partof our daily activities, we have also set up dedicated organizations at each of our sites.Our Groupwide environment assurance activities are coordinated by the ProductionManagement Headquarters’ Environment Engineering Center, by OperationalEnvironmental Coordination departments in our six Product Operations, and byEnvironment Management and Engineering Improvement departments in ourworldwide production companies. We also maintain environment management andrecycling promotion departments at all of our sales companies.

With the ISO 14001 international environmental management standard as abase, each of Canon’s operational sites has established an environment assurancestructure. We are working closely together to promote organized environment-focusedactivities throughout the Canon Group.

Grobal Cooperation (Canon Group Committees)

Global Environment Assurance Structure

Active Cooperation Between RegionalOrganizations and Committees under theGlobal Environment Assurance Structure

10

Chief: President,

Canon Europa N.V.

PresidentCanon Inc.

Chief: Directorin charge of the environment

Canon Global Production

Environment Promotion Committee

Canon Global Environment

PromotionCommittee

Americas Region Environment Promotion Committee

Chief: President,

Canon U.S.A., Inc.

Sales companies

Sales companies

Sales companies

Sales companies

Production companies

Productioncompanies

Productioncompanies

Oceania Region Environment Promotion Committee

Chief: Managing Director,

Canon Australia Pty. Ltd.

Production companies and

operational sites in Japan

Sales and sales/production

companies in Japan

Asia Region Environment

Promotion Committee

Chief: President,

Canon Singapore Pte. Ltd.

Europe Region Environment Promotion Committee

The Canon Global Environment Promotion Committee functions on a global level toplan activities involving the development, production and recycling of environmentallyconscious products, consumables and containers. Under this committee are fiveRegional Environment Promotion committees, as well as committees at our sites andaffiliated companies that can provide timely responses to environmental issues relatedto their sites and regions.

The Canon Global Production Environment Promotion Committee represents astrengthening of worldwide cooperation, particularly between Canon Inc. plants andproduction companies in the Canon Group. The objective of the committee is to promoteproduction activities that are in harmony with the environment. Working to improve theenvironment, we have also set up Environment Assurance Operational Managementcommittees for operational management at each of our manufacturing sites.

With a diverse organization of global environment assurance and environmentpromotion committees, Canon is actively integrating environment assurance activitiesthroughout its product development, manufacturing, sales and recycling.

Environment Information Network

11

Global Environment Assurance Structure

Creating an Environment Information Network toBetter Understand and Respond More Quickly toEnvironment Protection Trends

The Global Environment Information Network is an Intranet that connects 26 countriesin five regions, promoting environment assurance activities around the world. Usingthe network, our sites can quickly collect and share environmental information. A totalof 108 companies in the Canon Group, including Canon Inc. and affiliated companiesaround the world, participate in the network, which went on-line in July 1996 toprovide environmental information links. We have also assigned dedicated networkstaff at participating companies to collect information and distribute it via e-mail,ensuring that important data is constantly being circulated globally.

Further reinforcing and upgrading of our information infrastructure will eventuallygive all Canon Group companies access to information on subjects including chemicalsubstance management, green procurement and industrial waste. This will involveincorporating the vast quantities of information we collect into a database, which willcontribute to global environment protection.

Environment Information

Network

Americas (23 companies)Canon U.S.A., Inc.

Others

Japan (21 companies)

Canon Inc.Others

Europe (34 companies)Canon Europa N.V.

Others

Asia (24 companies)

Canon Singapore Pte. Ltd.Others

Oceania (6 companies)

Canon Australia Pty. Ltd.Others

Global Environment Assurance ActivitiesCanon is placing top priority on maximizing resource efficiency, making more effectiveuse of the earth’s limited resources. Our global activities focus on three main goals:energy conservation, resource conservation and elimination of hazardous substancesin Japan, the Americas, Europe, Asia and Oceania.

Evaluation

Pursuing in-house and third-partyassessments at each phase of product

life cycles

Information DisclosureEducation

Social Contribution

Development andDesign

Matching activities to trends inenvironment protection

ProductsEnergy conservation

Resource conservationElimination of hazardous

substances

ManufacturingThoroughly eliminating

wastefulness and reducing ourburden on the environment

Sales and MarketingImproving environmental and

economic efficiency

RecyclingPromoting recycling activities

worldwide

Technologies andDevelopment

Developing key environmentaltechnologies to hasten

environmental improvement

12 13

14

Working to Incorporate EnvironmentalConsiderations in Eco-Product Development byMatching Activities to Environment Protection Trends

To further the development of a recycling society, Canon is working from the planningstage to develop products with a minimal impact on the environment. Our considerationof the environment is evident from the development and design stages throughproduction, sales and recycling. At the same time, information on used products isbeing collected by sales divisions and fed back to product development divisions, whereenvironmental development and improvement opportunities are examined andimplemented.

To achieve the maximization of resource efficiency, we adhere to twoenvironmental principles and eight action items focused on energy conservation,resource conservation and the elimination of hazardous substances.

Eco-Product Developmentand Design

Canon’s Two Principles andEight Action Items for

Environmental Products

To preserve the earth’s environment:1. EQCD policy

2. From product planning through disposal

1. Strictly comply with the law

2. Conserve energy3. Conserve resources

4. Facilitate disassembly and collection5. Facilitate reuse and recycling

6. Minimize final waste after disposal7. Develop products with long lives

8. Develop products that last in the marketplace

Eco-Design System for Environmentally Conscious Products

15

Eco-Product Development and Design

Creating Eco-Design Systems* Centered onDesign and Assessment Standards throughEntire Product Life Cycles

As the 21st century approaches, people are increasingly concerned aboutenvironmental values. In order to use the earth’s limited resources more efficiently,Canon’s product development and design departments have been seeking tomaximize resource efficiency by establishing an eco-design system that is applicablethroughout the life cycles of Canon products.

In the field of ECP (environmentally conscious product) design*, “green”(environmental) information from suppliers of parts and materials, design standardsbased on recycling know-how from the marketplace, and product environmentassessment standards that prioritize the environment are important elements.*Refer to the “Mini-Glossary of Environmental Terms” on page 60.

(Setting Design Rules) (Design Evaluation) (Product Evaluation)

Eco-Design System

Mass Production

and Recycling

Plants

Marketplace

Collection

E (Environment) Q (Quality) C (Cost) D (Delivery)

Parts and Materials

Suppliers

Green Information

Recycling Know-how

Design Standards

ECP Drawings

Prototype Product

Product Environment Assessment Standards

New Social Values Prioritizing the Environment

(Mass- Production

Order)(Design) (Prototype)

ECP Design

Eco-Product Development and Design

Canon’s Product Design Standards* thoroughly ApplyEnvironmental and Product-Specific Design StandardsIncorporating Green and Recycling Information

16

Product-Specific Design Standards (Copying machines)

Information on Technological Standards for Environmentally Conscious Product Design

Official and Voluntary Regulations

Product Environment Standardization Committee

Environmental Design Standards (Environmental Engineering Standards and Environmental Design Guide)

Committees in Various Specialized Fields

Product-Specific Design Standards

(Chemical pproducts)

Product-Specific Design Standards (Bubble Jet printers)

Product-Specific Design Standards

(Laser beam printers)

In product design, we have established environmental and product-specific designstandards that help us implement our eight environmental action items. These guidelinescombine quality, performance and cost information with recycling information from themarketplace and green information from suppliers of parts and materials. In effect, thisinformation becomes a product design tool, helping us to select parts and materials thatconserve energy, and resources, and contain no hazardous substances.

We are also working to share this knowledge throughout the Canon Group inorder to improve the quality of our environmentally conscious products. To ensure thatour design standards lead to the rapid development of new technologies, our ProductEnvironment Standardization Committee and other dedicated committees regularlyrevise them. At sites where computer-aided design (CAD) systems are used to developand design products, publications and the Canon Intranet provide our personnel theinformation they need from any Canon location, 24 hours a day. Applying the mostadvanced information available, we are working to realize the ideals of ECP design.*Canon’s Product Design Standards are a combination of environmental and product-specific design standards.

Product Environment Assessment

17

Eco-Product Development and Design

From Product Planning to Mass Production, Canon Implements Three Assessments of Every ProductBased on the Concept of Life Cycle Assessment (LCA)*

Product Planning Development and Design, Trial Production Production

Three-Stage Product Environment Assessment

Productivity of Mass ProductionConcept Functions Product Productivity

Stage 0 Assessment Stage 1 Assessment Stage 2 Assessment

Decision to Proceed Decision to Proceed Proceed Mass Production

Items assessed: 11 basic and 55 specific

Product Proposal(Setting of Goals)

Realization of Specifications

Realization of Trial Production

Canon conducts product environment assessment three times from the planning tothe mass production stages. Stage 0 Assessment, during the planning stage, sets aproduct’s environmental objectives. During development, environmentalconsiderations from the environmental design standards are added to theseobjectives. When the product prototype is completed, Stage 1 Assessment isconducted and the results are incorporated into the production testing stage. Finally,after production has been tested, the product is submitted to Stage 2 Assessment.Only products that clear all of these assessments can proceed to mass production.

By implementing these precise assessments and ECP design, Canon has beenable to markedly reduce the number of parts in major products such as copyingmachines and printers. We have also made great leaps in areas such as shorteningdisassembly times and raising the recoverability ratio of our products. Moreover, theuse of LCA to promote scientific measurement of a product’s environmental impacthas significantly improved the quality of our new-product decision making.*Refer to the “Mini-Glossary of Environmental Terms” on page 60.

18

Implementing Worldwide EnvironmentalManagement to Eliminate Wastefulness andReduce Environmental Impact

Canon introduced the Canon Production System (CPS) in 1976 to raise productivity. At theheart of the CPS is the elimination of wastefulness, which also translates into a reducedimpact on the environment.

In 1998, the primary focus of CPS was changed to TSS 1/2 (Time & Space Saving1/2), or reducing the time and space required by production by half. We are now working toimprove our environmental efficiency while simultaneously increasing productivity. Each ofour production sites takes to heart the principle “plants that fail to protect the environmentshould not be in operation.” We are constantly challenging to maximize resource efficiencyin-house and at suppliers of parts and materials. Furthermore, all of our manufacturingfacilities are working within the BS 7750/ISO 14001 environmental managementstandards. We obtained out first ISO 14001 certification in 1995, for facilities at the Amiand Ueno plants in Japan. Since then, we have earned certification at other plants in Japan,the United States and Europe.

Green Procurement

Energy Conservation

Resource Conservation

Elimination of Hazardous Substances

Risk Management

ACTION

PLAN

DO

CHECK

Eco-Production

Green Procurement

19

Eco-Production

Working with Suppliers to Increase Green Procurement

Manufacturing

Green Procurement Management System for Parts and Materials

Independent Product Check

PromotionalInformation

Independent Check of Corporate Structure

Registration

Registration

Parts Database Electronics, Mechanical

and Materials

SupplierDatabase

ProvidingInformation

ProvidingInformation

Providing Information toSupport the Selection of

Parts and Materials

Design

In procurement, Canon works actively with its suppliers to promote environmentalpreservation. We believe it is important to encourage green procurement activities,purchasing environmentally conscious parts, materials and products that contribute toenergy conservation, resource conservation and achieving zero waste.

Full-scale implementation of our Green Procurement Program began in 1997. Thisincluded the establishment of a Green Procurement Subcommittee and of principles andstandards of green procurement, as well as cooperative activities with suppliers around the worldand the creation of an information network. On the theory that “Green products = Corporatesupplier structures + Products themselves,” we have identified seven supplier parameters. Thesecover corporate philosophy, planning, organization, systems, evaluation, information disclosureand education. They also include 11 product parameters covering the observance of legal andvoluntary regulations, energy and resource conservation, the surrounding environment, chemicalsubstances, recycling, industrial waste, packaging materials, LCA, eco-labeling and informationdisclosure. We use these parameters to determine the “greenness” of all aspects of prospectivecomponents and make procurement decisions accordingly.

Through Environmental Seminars, we seek mutual understanding with our suppliers.To date, these seminars have earned the acceptance of green procurement by approximately1,100 companies in Japan, 200 in the United States and 200 in Southeast Asia, for a total ofsome 1,500 companies.

Furthermore, we have completed our examination of approximately 30,000 items ofmaterials and parts from over 400 suppliers. Currently, we are providing the environmentalinformation on resin material to the products development and design departments and asimilar information system for parts is being developed.

Energy Conservation and Management

Eco-Production

Designing Buildings to Conserve Energyand Improving Equipment-Usage Efficiency

20

New R&D building at the Toride Plant Certificate (above) and logo (right) of the Environment and Energy Excellence in Architecture System

Canon has challenged energy conservation acknowledging it as the most important issuein Eco-Production theme. In 1999, the Canon Group in Japan used 44% of its energy forair conditioning and heating, 40% for production activities, 10% for lighting and 6% forother purposes. From this base, we have set three objectives for production-related, R&Dand management sites throughout the Canon Group. We are now promoting activitiesthat will allow us to reach these goals while taking into account the unique characteristicsof operational sites.

For example, at Canon Inc.’s Toride Plant in Japan the environment was animportant consideration from the planning stage for a new R&D building. Completed inJune 2000, the building is expected to achieve a 40% reduction in energy usage overexisting energy consumption standards. Conforming to the Environment and EnergyExcellence in Architecture System established by the Institute for Building EnergyConservation in March 1999, the building is one of only five structures in Japan to receiveinitial certification under the system. The primary reason for this certification is that thearchitectural specifications for the building take the environment into full consideration.These specifications include infrared-ray-absorbing glass and a water thermal storagesystem that uses electricity during night hours. Other features include low-energy lightingand a toilet-flushing system that can use rainwater.

To promote energy conservation at Nagahama Canon Inc., we installed electricity-usage meters on major pieces of equipment and analyzed the relationship between energyconsumption and equipment usage. We have also introduced ice thermal storage air-conditioning equipment to use electricity during night hours at the Fuji-Susono Research Park.

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Waste Reduction and Management Activities

Eco-Production

Eliminating Waste by Separating Out andRecovering More than 230 Kinds ofIndustrial Emissions

Canon considers waste from production processes to be as undesirable as defectiveproducts. To eliminate waste, we first work to minimize emissions during productionand then reclaim what remains through recycling. After careful analysis at productionsites throughout the Canon Group, we have identified more than 230 different kindsof industrial emissions.

Since July 1997, Canon Group have shared the information covering the overallemissions and have controlled the emissions by activating an online data base systemthat integrates the emission data identified as above-mentioned (manifest check data),information about the consigned waste processors and information related to recyclingpromotion. Also, we are using the information collected by this system to work on themeasures for the reduction of industrial waste and the promotion of recycling.(Refer to the Environmental Performance Data on Page 49)

Inter-office communications

Waste Data Management Operational sites and manufacturing subsidiaries

Waste Data Management Environment Engineering Center at Canon Inc.

Waste Data Base● Manifest check data● Mid-term action plan for waste● Information about recycling support● Web site with waste related information

Canon Inc.● Data management● Data analysis and study● Provision of waste related information

Executive Office● Manifest check data input● Calculation, analysis and study of data from

operational sites● Information about the consigned waste processors● Request for recycling support● Viewing Web site with waste related information

Workplace● Viewing Web site with waste related

information

In-house Global Network

22

Resource Conservation (Water Closed Recycling)

Eco-Production

Recycling All Water Used in Plants byComplete Water Circulation System

Canon has been striving to achieve a grandiose theme of zero-wastewater from plants.Conserving important living aquatic resources in lower reaches of nearby rivers and livingharmoniously with the region is an important factor to select the sites for our plants.To date many of our operational sites have recycled the water used in the productionprocess, however, we need to overcome various obstacles in order to establish acomplete closed system which uses the circulation of all the water such as wastewaterfrom the production process and sewage.It requires higher cleansing technology thanreleasing wastewater into rivers at safe level. At Canon, we have challenged closeddrainage system by exploiting a variety of technologies.For example, for cleansing sewage we took advantage of the technology of using amembrane developed in recycling wastewater in lens production, and for thedesalination process, technology developed in toner production was used. As a result,Oita Canon Materials Inc. has achieved zero-wastewater.These various water cleansing technologies have also been implemented at ourHiratsuka Development Center, Ami Plant and Ueno Chemical Products Plant, and arecontributing to the effective usage of water resources. (Refer to the Environmental Performance Data on Page 49)

Oita Canon Materials Inc. worked with a variety of technologies to achieve zero wastewater.

Managing Chemicals and Eliminating Hazardous Substances

Eco-Production

Working to Eliminate, Reduce and Controlthe Discharge of Hazardous Substances

23

Regional Committees● Management of substances in use

at operational sites● MSDS data retrieval● Registered chemical data retrieval

Workplaces● Applications for chemical use and chemical data retrieval● Input of amounts used● Registered chemical data retrieval● MSDS data retrieval

Data Processing for ChemicalsCanon Inc. Environment Engineering Center

Chemical Substance Database

MSDS Database

Database of Substances in Use at Workplaces

● Registration number issuance● Registration data● MSDS registration● Groupwide management of substances

in use by the Canon Group

In-HouseNetwork

Management of ChemicalsCanon uses some 9,000 kinds of chemicals in its production, each of which is identifiedwith a registration number and carefully managed with due consideration of itsenvironmental impact. When new and unregistered chemicals are considered for use,Canon Inc. deliberates with regional committees. Only substances that are certifiedthrough this process are assigned registration numbers and approved for use.

In the summer of 1997, we created an online database system to handle informationretrieval and applications for new substance approval. This system has simplified chemicalmanagement, making it easy to check on the status of specific chemicals, inventories atindividual operational sites and amounts being used. We have also made it possible toconfirm our Material Safety Data Sheets (MSDS)* at in-house computer terminals to sustainthe timely and appropriate management of the chemicals we use.

Eliminating Hazardous SubstancesAs of the end of 1997, Canon had eliminated the use of such chlorinated organicsolvents as trichloroethylene (TCE), tetrachloroethylene (C2Cl4) and dichloromethane(CH2Cl4), which were used to clean metals, from all but a few of its manufacturingprocess. In addition, we have created a list of approximately 2,000 substances that areharmful to health and the environment, classifying them with the emission goal-rankings A (Eliminate), B (Reduce) and C (Control Discharge). We have also developedsystems to effectively manage these substances in line with Pollutant Release andTransfer Registers (PRTRs)*.

We have already established internal regulation standards that surpass all legalregulations and are currently developing alternative technologies in a consistent, Groupwidemovement to deal with hazardous substances throughout our production activities.*Refer to the “Mini-Glossary of Environmental Terms” on page 60.(Refer to the Environmental Performance Data on Page 50 to 52)

24

Risk Management

Eco-Production

Promoting Independent EnvironmentalPreservation Activities to PreventPollution before it Occurs

Environmental AuditingSince 1994, Canon Group operational sites have pursued environment assurancethrough our own Production Environment Assurance Standards, which are also in linewith ISO standards. To independently reinforce this assurance process, we haveinternal auditing programs run by auditors of the head office environment departmentand by auditors stationed at individual operational sites.

Environmental Analysis and MeasurementTo meet the requirements of Japan’s Measurement Lawand Working Environment Measurement Law, Canon hasestablished a system incorporating an EnvironmentalMeasurement risk legal requirements in Japan, Canon hasestablished a system incorporating an EnvironmentalMeasurement Certifier and Working EnvironmentMeasurement Organization. To fully understand theenvironmental status of each Canon operational site, wehave also established a system that independently sets thefrequency and management of measurement activities. Using state-of-the-art equipment,Canon personnel with environmental Certified Public Measures and WorkingEnvironment Measurement credentials measure and analyze our activities, facilitatingspeedy responses when required.

Prevention and PreservationOur Production Environment Assurance Standards callfor a variety of preventive measures to reduceenvironmental impact throughout our businessactivities, from production processes to equipment tobuildings and other structures. When new equipment isintroduced, we always ensure that it incorporatesappropriate pollution-prevention measures. Specificprevention and preservation recommendations includeencouraging the placement of equipment so that it canbe inspected from all sides and eliminating the use of underground installations.

Risk ManagementRules have been established in the environmental management guidelines of ouroperational sites to deal with unpredictable cases when the environment isunavoidably affected. For example, these rules specifically define procedures tospeedily and reliably limit the environmental impact of fires, earthquakes, floods andpower outages, preventing their expansion and aiding the recovery from any damage.These rules include instructions on handling information during such events.(Refer to the Environmental Performance Data on Page 53)

Wastewater inspection equipment

Environmental analysis and measurementfacility

Pursuing CO2 Reduction and Eco-Distribution Activities to ImproveEnvironmental and Economic Efficiency

Shortening Routes between Plants andExport Ports Previously, products manufactured at Hirosaki Sieki,Inc., a subsidiary of Canon Precision Inc., were sentby truck from Japan’s northern Tohoku region to adistribution center in the Kanto region, where theywere packaged in containers for export from the Portof Tokyo. In 1997, however, we established aregional distribution center in Tohoku, allowing us tooptimize this distribution route by handling containerpackaging and export directly from the Port ofSendai, which is also located in Tohoku. As a result ofthis move, we were able to ship approximately 3,200containers in 1999 and reduce the distance traveledby trucks by about 1,280,000 kilometers.

At Canon Inc.’s Ami Plant, we have pursuedan even more revolutionary system for the pastseveral years: packaging products in containers on-site and shipping them directly to the Port of Tokyo.Toride and Ami plants and other Canon Group companies such as Nagahama Canon,Inc., Copyer Co., Ltd. and Canon Electronics Inc. are also using this system. In 1999,these sites filled more than 3,900 containers on-site.

Programs such as these have helped Canon greatly reduce shipping distances,contributing to the prevention of global warming by reducing CO2 emissions andconserving energy. Efficiency has also increased because of reduced inventories.

Establishment and Operation of an Exchange Center for Collected Copying Machines (Tokyo)With the idea that manufacturers should recycle their products, Canon has taken aleading role in the establishment of an exchange center for collected copyingmachines, a facility designed to support efficient, industrywide return to manufacturersof copying machines that are traded in for new products from different manufacturers.This center, managed primarily by the Japan Business Machine Makers Association(JBMA), began full-scale operations in the Tokyo metropolitan area in May 1999 withthe cooperation of Canon and other manufacturers in the industry. In 1999, includingthe trial period from January, the total number of the copying machines that werereturned to their manufacturers was 10,398. A sizable increase in numbers isexpected in 2000 due to the fact that the Tokyo center started to cover the wholeKanto Region and a new center was established in the Kinki Region. (Manufacturers participating in the Exchange Center: Canon, FujiXerox, Konica, KyoseraMita, Matsushita, Minolta, Ricoh,Sharp and Toshiba)

25

Eco-Sales

Hirosaki–Tokyo770 km

Distribution Route Reduction

Hirosaki–Sendai375 kmHirosaki

Tokyo

Sendai

CO2 40 feet container

CO240 feet container

26

With a Tri-Region Organization, We Are PromotingRecycling on a Global Level, Remanufacturing ofUsed Canon Products and Reuse of Parts

Canon believes that sales and recycling activities should be pursued with the activecooperation of our customers. We are therefore promoting recycling activities aroundthe world with a focus on methods that have minimal environmental impact and arematched to the needs of society and customers.

Canon’s view of product life cycles begins from the planning stage, and we areundertaking a range of recycling activities for everything from individual parts topackaging materials. In our sales operations, we are working to raise environmentalefficiency from product shipping to the collection of used products.

In recycling, we place the highest priority on product remanufacturing, then onpart reuse, on material recycling and finally on thermal recycling. We have organized atri-region structure that pursues these priorities on a global scale. We are alsopromoting the development of technologies and products that will raise our recyclinglevels, improve resource efficiency and eliminate waste.

Canon also applies the same quality and safety standards to remanufacturedproducts and reused parts as it does to brand-new parts.

Copying machinesToner cartridgesBubble Jet ink cartridges

Tri-Region Recycling Organization (Recycling Bases)

Sales Coordination in EuropeCanon Europa

Canon Manufacturing U.K.

Canon Bretagne Canon Giessen

Sales Coordination in AsiaCanon Singapore

Canon Dalian Business Machines Canon Sales

Canon Copyer

Canon Recycling Operations Center (CROC)

Canon Australia

Sales Coordination in the AmericasCanon U.S.A.

Canon VirginiaCustom Integrated TechnologyIndustrial Resource Technologies

Recycling Bases

Recycling

Copying Machine Remanufacturing

27

Recycling

Remanufacturing to the Same Standards as NewProducts–Part of Canon’s Product RecyclingPrograms for Environmental and Economic Efficiency

Canon’s copying machine remanufacturing* activities are global in scale and quality-focused. In fact, remanufactured machines are on a par with similar-capability newcopying machines.

We began remanufacturing copying machines at Canon Virginia in the UnitedStates in 1992. During the following year we initiated a similar program at ourprimary European site, Canon Manufacturing U.K. To expand remanufacturing inNorth America we established Custom Integrated Technology, a subsidiary of CanonVirginia, in 1995. Later, in 1998, we began remanufacturing copying machines inJapan at the Kofu Plant of Copyer Co., and in 1999 transferred our European activitiesfrom Canon Manufacturing U.K. to Canon Giessen in Germany.

Copying machine remanufacturing begins by disassembling collected machinesinto their constituent parts. We then perform rigorous inspections of the separateparts, reusing only those that pass our screening and replacing worn parts with newones. The result is a high-quality remanufactured machine. In 1998, Canonremanufactured 3,000 copying machines in the United States and 2,400 in Europe, allof which were delivered to customers around the world. *Refer to the “Mini-Glossary of Environmental Terms” on page 60.(Refer to the Environmental Performance Data on Page 54)

Canon Manufacturing U.K. Custom Integrated Technology The Kofu Plant of Copyer Co., Ltd.

Toner Cartridges

Recycling

Worldwide Collection of Toner Cartridgesfor Recycling

The toner cartridges used in personal copying machines, laser beam printers andfacsimile machines are an essential part of office and home information-processingequipment across the world. Since Canon began supplying these cartridges in 1982,we have earned a reputation for easy maintenance, high reliability and excellentoverall imaging quality. Canon was also one of the first companies in the industry toreduce the load that toner cartridges place on the environment. In 1990, we beganour global toner cartridge collection and recycling program, which is now operating in21 countries throughout the Americas and Europe, in addition to Japan.

Toner cartridges that we collect from these regions are shipped to threelocations for disassembling and recycling: Industrial Resource Technologies, asubsidiary of Canon Virginia in the United States, Canon Bretagne in France andCanon Dalian Business Machines in the People’s Republic of China.

One of the most important aspects of our recycling activities is our level of attentionto quality. Cartridges collected by each facility are disassembled and parts that can bereused are removed. Parts destined for reuse are cleaned and subjected to the samestringent quality assurance checks as new parts before they are used on the assembly line.

Our second approach to recycling is to consider environmental impactthroughout the entire product life cycle. For example, when parts cannot be reused asis, we are working actively to use these parts as materials in other applications. (Refer to the Environmental Performance Data on Page 54)

28

Canon BretagneCanon Dalian Business Machines Industrial Resource Technologies

Bubble Jet Ink Cartridges

29

Recycling

Bubble Jet Ink Cartridges Parts–Morethan 97% Recoverable

In 1996, out of concern for the environmental impact of Bubble Jet ink cartridges,began placing collection boxes at Canon Zero One shops (Canon Sales retail outlets)and service centers throughout Japan. This approach was designed to collect the usedBubble Jet ink cartridges with the active cooperation of our customers.Including general volume retailers, the number of shops participating in the collectionhas reached well over 2,000 across the country in 2000.

The cartridges collected in this way are then brought to the Canon RecycleOperation Center (CROC) at Nippon Typewriter Co., Ltd., located in the city of Iwai, inIbaraki Prefecture. Here the cartridges are separated into material groups for reusing asplastic or metal parts. The specialty resins used with the cartridge ink tanks are reusedas a part of cartridge materials, which enables closed recycling. Additional resins,metals and other materials are also recycled and put to other uses.. In 1998, we beganusing some of these materials as a reducing agent for blast furnaces—an alternative tocoke—further increasing the percentage of cartridge that are recycled. As a result, therecoverability ratio exceeds 97% by weight.(Refer to the Environmental Performance Data on Page 54)

Automatic disassembly of Bubble Jet ink cartridges (CROC) Resin washing and drying equipment (CROC)

Resource Conservation in Packaging Materials

Recycling

Reducing Polystyrene Packaging andPromoting Closed Recycling

Canon is extremely conscious of the environmental impact of the materials it uses inpackaging the products delivered to its customers. Instead of wooden pallets, we havebegun placing products on cardboard pallets. In place of polystyrene foam, we havebegun using pulp molds to package smaller products, and many of the protectivestretch films that we use for packaging are now recyclable.

Canon began phasing out its use of polystyrene foam at the end of 1991. By1997, we had halved our use of this material, compared with 1990. At the end of1997, Canon also mounted a Groupwide initiative to encourage the closed recyclingof polystyrene foam, and this recycling began in May 1998 and over 200 tons wererecycled in 1999.

The recycling system calls for the collection of polystyrene foam used by allCanon Group and affiliated companies throughout Japan. This foam is then meltedand reformed into reusable beads that can be used to pack other Canon products.Packaging materials that incorporate these reused beads have the same cushioningproperties as the original polystyrene foam.(Refer to the Environmental Performance Data on Page 55)

30

Recycledpolystyrene foam

Pure polystyrene foam

Closed Recycling of Polystyrene Foam

Canon

Partspackagingmaterials Canon Sales

Recycled materials suppliers

Beads suppliers

Formed-productssuppliers

Users

Petrochemical suppliers

Styrene monomer

Packagin

g mater

ials

Pac

kaging d

esign and

ma

terials de

signation

Contracted polystyrene foam

In July 1999, the Japan Packing Institute presented Canon Inc. with the Electric Equipment Packing Category Award for itsclosed recycling system for polystyrene foam.

Reusable Packaging for Parts

31

Recycling

Reducing Environmental Impact and CostsInternationally through Returnable Boxes

Canon partsexport facility

International Returnable Box System

Recycling period:four to five months

Overseas Canonproduction sites

Collapsible containers

Domestic containerwarehouse

Domestic Part plant

Canon provides a wide range of key parts from Japan to its overseas manufacturingsite in the Americas, Europe and Asia. By reusing the materials used when these partsare packaged for export – including cardboard boxes, plastic containers, shock-absorbing materials and dividers – we have greatly reduced the load that Canon’sdistribution activities place on the environment.

In the past, materials that were used to package parts destined for export wereconsidered disposable. Today, however, Canon is actively working to standardize thesizes and types of materials used in such packaging. We are also encouraging the useof foldable reinforced cardboard and collapsible steel containers and trying to reducethe volume of plastic container accumulation, thereby minimize the cost of shippingsuch materials back to Japan. As a result of these efforts, we reduced the amount ofplastic containers that hold parts used in toner cartridge production by a total of 531tons in 1998 and 436 tons in 1999. These efforts have also substantially decreasedthe levels of waste in countries that import these parts.

Also, we have standardized the size and material of the pallets used forimporting parts from overseas. The new cardboard pallets currently being used arerecycled for domestic and overseas use and they also serve best for “wooden palletcontrol” in China.

32

Environmental Improvement throughIndependent Development of KeyEnvironmental Technologies

Canon is committed to developing eco-technologies that help conserve energy andresources, as well as eliminate hazardous substances. Through these efforts, we areminimizing the environmental impact of Canon products throughout their product lifecycles. Our priorities are to reduce the energy that products use, to ensure zero emissionsof hazardous substances in office environments and to elminate hazardous substancesso as to raise safety levels during product disposal. Canon is also realizing resourceconservation by developing recycling technologies, and smaller and lighter products.

Furthermore, as some of the specialized solvents and gases used inmanufacturing processes can contribute to global warming, Canon is developingtechnologies to eliminate or minimize the use of such materials in production processes.

Eliminating Hazardous SubstancesOzone-Free Electrical Charging Technology

Technology Making VOCs Harmless

Energy ConservationOn-Demand Fixing Technologies

Technologies to Eliminate Designated Solvents and Gases

Resource ConservationPlastics Recycling Technologies

Eco-TechnologyDevelopment

33

On-Demand Fixing Technologies

Eco-Technology Development

Taking the Lead in Conserving Energy

Time (minutes)10

Pressure Roller

Figure 1Heated Roller Fixing Method On-Demand Fixing Method

Fixing RollerHalogen Heater

(Image Surface)

Paper

Pressure Roller

Fixing FilmCeramic Heater

(Image Surface)

Paper

Note: This is a comparison of the LBP-830 and LBP-840 printers outputtingone page per 10 minutes, or 42 pages in seven hours.

Figure 2Canon’s LBP-840 laser beam printer automatically goes into standby mode only nine seconds after power is supplied. There is no warm-up time between this mode and the start of printing. On average, LBP-840 printers use only 17 W par day in standby mode, and its CO2 emission is also substantially reduced.

Heated-Roller Fixing Method

Power Requirements Reduced to One-Fourth

On-Demand Fixing Method

In Standby Mode

SleepMode

PrintingEndsData

FirstReceived

PrintingBegins

Warm-up

Difference in printing time

PrintingBegins Printing

EndsPowerUsage

Standby Mode

Canon’s originally developed on-demand fixing technologies address two issues thathave in the past posed seemingly insurmountable challenges in the application oftoner to paper: conserving energy and eliminating lengthy warm-up times.Conventional heated-roller fixing uses heat inefficiently because the halogen heaterhas to keep the roller warm in standby mode, unless the user is willing to acceptwarm-up times of up to one minute. By contrast, Canon’s on-demand fixingtechnologies achieve vastly improved heat transfer efficiency and lower heat capacityrequirements with a thin fixing film and a ceramic heater. With this revolutionarytechnology, heat is applied only when paper passes through the fixing mechanism,and the image is fixed via the fixing film. (See Figure 1.) Consequently, energyconsumption is reduced to one-fourth of the conventional level, without causing longwarm-up times (see Figure 2).

Canon offers a full lineup of laser beam printers, copying and facsimilemachines and multifunctional peripherals that use on-demand fixing, with outputranging from A4- to A3-size paper.

Technology for elimination of Non-energy Gases causing Global Warming (PFCs,HFCs,SF6)

Eco-Technology Development

Completing Elimination of Gases thatIncrease Global Warming

Canon has completed the elimination of the three kinds of gases (PFCs, HFCs, SF6) fromthe production process in accordance with the decision made at the Third Conference ofthe Parties (COP3) in Kyoto in 1997. These gases are said to have thousands to tens ofthousands of times the greenhouse effect compared to that of CO2.

PFCs which took up about 70% of the special coating solvent used for thetoner cartridge was replaced by hydrofluoroethers (HFE) which has a lower greenhouseeffect. Also, we have terminated the use of HFCs as aerosol propellant in the spraysystem by switching to a system using compressed air.

Since we have not found an effective replacement for PFCs which are used inthe production and cleansing of semi-conductors, we will continue to seek a solution.We are also considering the termination in the future of the use of HFE that replacedPFCs by implementing other systems such as a powder coating system in which nosolvents will be necessary.PFCs: perlfluorocarbonsHFCs: hydrofluorocarbons(Refer to the Environmental Performance Data on Page 48)

.

34

Toric lenses

By the end of December 1999, we had completed the conversion of thenon-energy special solvents and gases, used for the production of the partsshown below, to substances that have smaller effect on global warming.

Bubble Jet printing head parts Cleaning and developing blades for toner cartridges

Magnetic heads

35

Plastic Recycling Technology (Sandwich Molding)

Eco-Technology Development

Challenging New TechnologyDevelopment Sandwich Used Plastic withVirgin Material

Plastic Recycling System

Recycled material

Used Canon copying machines

NP6030, etc.

Identifying materialEvaluation of deteriorationPulverizingPrecision cleansing

Recycled pellets

Virgin pellets

Sandwich molding

Parts made by sandwich molding

Cross Section DiagramVirgin material

Almost all housing material of business machines is made of plastic. Generally, plasticdeteriorates during the usage, such as yellowing by ultra-violet light, loss of strength andflame resistance by hydrolysis. Therefore, it is not easy to maintain the same quality inrecycling plastic.

Other than using the method of mixing virgin pellets with recycled pellets torecover solid state properties, we have developed the technology of sandwich molding.By putting recycled material between virgin material, the recycled material gets containedinside and does not come out of even thin materials and uniformly fills all materials.This method has two advantages:1. Since virgin material is used for the surface, used material does not affect the outer

look of the products.2. Mixing and toning of used materials not required, and the strength and flame

resistance of the used material will not decrease because it is not heated in the process.The parts made in this method have achieved a 30% containment of used material

and cleared the strict flame resistance standard (UL 94-5 VB).In 2000, we will start selling copying machines using housing material made from

the sandwich molding technology. Also, we are planning to use the method widely forother products such as laser beam printers, Bubble Jet printers and facsimiles.

Ozone-Free Electrical Charging Technologies

Eco-Technology Development

Contributing to Clean Office Environmentswith Technologies to Minimize OzoneEmissions from Office Equipment

36

Vmax

VDC

VTH

VTH

VPP

Vmin

Shaft

VPP 2VTH

Voltage Changes During PrintingImaging Components

Photosensitivedrum

Cleaner

Transfer roller

Electricalcharging roller

Laser beam

Developing roller

Cross-Section of Electrical Charging Roller

Protective coating

Resistive layer

Conductive layer

Ozone-Free Electrical Charging Technology

>=

Note: In June 1999, Canon won the Prize of the Commissioner of the Japanese Patent Office and Invention Practice Service Prize for itsozone-free electrical charging technology. The awards were announced at the Prize of the Commissioner of the Japanese PatentOffice ceremony hosted by the Japan Institute of Invention and Innovation.

Conventional laser beam printers, copying and facsimile machines typically use aCorona electrical charging system, which electrifies a photosensitive drum. The Coronasystem typically involves voltages of between 5,000 and 10,000 volts, and producesozone. Ozone absorption filters with complicated internal designs and airflows have tobe fitted to these machines to prevent ozone emissions. However, Canon has developeda new roller charging method that superimposes alternating current and direct currentwaveforms in the conducting roller. Compared with the Corona electrical chargingsystem, this method reduces ozone production to only 1/1,000th of conventional levelswhile cutting the reference voltage to one-fifth of the former level.

In 1989, Canon unveiled its ultracompact LBP-LX laser beam printer–the world’sfirst commercial device to use this new technology. Because of its lower referencevoltage and lack of ozone absorption filters–which facilitates streamlined airflow–thisprinter was simpler than conventional models. A substantial reduction in the number ofcomponents also simplifies maintenance, making this printer suitable for personal use.Since its introduction, this printer has earned a solid reputation for its contribution toenergy and resource conservation, as well as to cleaner office environments.

Technology Making VOCs * Harmless

37

Eco-Technology Development

Developing Technology Making VOCsHarmless to Stop Emission of HazardousSubstance into Air

In March 2000, PRTR (Pollutant Release and Transfer Register) was enacted andcontrol and emission of environmental hazardous substances has become morerestricted than ever. At Canon, we used approximately 100 kinds of chemicalsubstances in the production process in 1999, and have been working towardemission control, usage reduction, and defusing.

Currently, various technology making VOCs harmless, such as photolysis,biolysis, catalysis, thermal, and plasma technology are being considered. We havebegun to examine non-thermal plasma technology which is thought to be the easiestand has the highest decomposition efficiency. VOCs such as methanol, toluene, xyleneand methylethylketone which are all gasifiable can be decomposed completely byimpressed voltage of some kV and made into carbon dioxide and water. As aconsideration factor of non-thermal plasma technology, we have been studyingreactor vessels, characteristics of ferroelectric and the kinds of VOCs and so forth. For steps towards the practical application, we are planning to establish technology todecompose by-product material, increase decomposed quantity and confirm theeffectiveness on pilot lines at actual plants.Moreover, plans are being made to develop a smaller decomposing VOCs device.* VOCs: Volatile Organic Compounds

Gas to be processed Decomposed Gas

BaTiO3 pellet

High Voltage Electric Power Supply

VOCs Defuse Test System

Canon Cameras and the Environment

Lead was once present in half of the approximately 200 types of optical glass used inlenses, because it raises the degree of refraction. The lead is fixed in the glass, sothere is no danger of it escaping during use, but glass sludge waste, a by-product oflens production, also contains lead and can be environmentally hazardous.

Avoiding lead altogether is the ideal way to reduce the amount of lead given offduring processing. Canon began tackling this problem in 1991, when we joined glassmanufacturers in an effort to jointly develop different types of lead-free glass. As aresult, we found that environmentally stable titanium could be used in place of leadwithout sacrificing optical characteristics.

As of 2000, Canon uses approximately 100 types of lead-free glass. Thephotographic lenses of Canon’s lens-shutter cameras are now 100% lead-free, as areour EF lenses for EOS series SLR cameras (with the exception of a few types ofspecialty lens). By using lead-free glass and plastic, we have also nearly eliminated the use of lead in viewfinders. Our work on small-diameter lenses and new formingprocesses should decrease the level of lead waste still further. Outside of Japan,Canon produces cameras in Taiwan, Malaysia and the PRC, and nearly all of the glassused in cameras made at these sites is lead-free.

We are also moving toward more environmentally conscious camera bodies andexternal parts by increasing the use of aluminum, stainless steel and other metals. The result is higher-quality products that are more recyclable. Canon is also reducing theamount of parts used in cameras, making them more compact and lighter.

Additionally, Canon was one of the first companies in the industry to adopt theAdvanced Photo System, which allows developed negatives to be stored in theoriginal film cartridge. This system cuts down substantially on film cartridge disposal.

38

Cameras and Lenses

IXY320/ELPH2/IXUS2 EF lens series

Eco-Products

Copying Machines

39

Eco-Products

Eco-Technologies Improving Office Environments

Canon is actively applying its environmental expertise, from eco-technologies and on-demand fixing to ozone-free electrical charging, to its line of copying machines. Eventhe development of these machines is based on environmentally consciousspecifications in the form of environmental product policies:

1. Energy-conserving designs control CO2 emissions2. Easy-recycling designs help promote recycling consciousness3. Clean-operation designs help promote environmental protection

Thanks to recent rapid progress in digital networking technology, we have alsobeen able to add new document management and processing functions, developingapplication technologies that add capabilities to our copying machines. In these andother ways, we are actively creating user-friendly offices, comprehensively improvingevery aspect of the environment with our products.

Furthermore, we have been promoting a “remanufacturing program” in whichproducts made redundant by users are collected and remade in equal quality as newproducts, a “reusing program” in which disassembled parts are recycled and reusedfor new products, and a “recycling program” in which unusable parts aredisassembled and separated to be recycled and the materials reused.

GP405 series/imageRUNNER 400SGP605/ImageRUNNER 600

Promoting Energy-Saving PrintersOn average, printers output only about 40 pages a day during normal operatingconditions, meaning that they are in standby mode most of the time. Canon was thefirst company in the industry to focus on this fact, which led to the development andincorporation in laser beam printers of technologies such as on-demand fixing (seepage 33). Because this technology removes the need for printer warm-up time, evenhigh-performance machines such as the LBP-910, a high-speed model that can outputA4-size paper at 22 ppm (maximum up to A3), usean average of only 14 W per day in standby mode,about a quarter of the consumption of earlierprinters. This also allows our printers to meet thetargets of the international ENERGY STAR® officeequipment program while contributing to CO2emission reduction. Canon is currently expanding itslineup of on-demand products, actively developingproducts that are environmentally conscious.

Blue Angel Certification (Germany’s Eco-Label)Canon makes its laser beam printers easy todisassemble and their parts easy to classify byclearly indicating the materials used and byreducing the glued surfaces in its plastic housingsand packaging materials. These activities are part ofour effort to achieve product designs that have highlevels of reusability. As a result, most Canon laserbeam printers since the LBP-1760, which wasreleased in 1998, have earned certification underGermany’s Blue Angel program, which has some ofthe strictest requirements in the world.

Laser Beam Printers

Eco-Products

Creating Printers that AreEnvironmentally Conscious

40

1,000(Wh)

750

500

250

0

LBP-910

Daily Energy ConsumptionMeasurement Conditions● One page output per 10 minutes (text data)● Seven-hour measurement (one day)● Output from sleep mode● Measured at room temperature

Approximately 1/4 energy consumption

Previous Canon product

LBP-350 LBP-740e LBP-1760e LBP-950

On-Demand Laser Beam PrintersPersonal model Standard models High-end models

Ink tanks that can be replaced individually

Materials marking all plastic parts more than 20 g in weight

Environmental Features of the BJC-620

Label reduction through etching

CD-ROM reduces weight of paper operating manual

Installation of holes under product nameplates to facilitate removal

All screws conform to M3 specifications

Thinner plastic housing

100% recyclable plastic housing

Introduction of snap-fit couplings

No specific brominatedflame retardant

100% resource reclamation possible

63% energy consumption reduction in standby mode(compared with the BJC-7000)

Zero waste products from manufacturing

Produced only at plants with ISO 14001 certification

Parts and materials selected through green procurement

Bubble Jet Printers

41

Eco-Products

Bubble Jet Printer Designs Focus on Recycling

Energy-Saving DesignsMost conventional ink-jet printers are in standby mode for longer periods than whenprinting, which increases their power consumption. Canon’s design emphasis hasbeen to conserve energy not only when printing, but also during these long standbyperiods. One result of this focus is the BJC-620, which cuts energy consumption whenin standby mode to about 63% that of conventional models.

Designs for Resouce ConservationWith the BJC-620, we sought to improve resource efficiency through a number ofdifferent approaches. For example, by creating thinner plastic housings we achieved a20% reduction in product weight from previous models. By clearly indicating thematerials in the printer’s plastic housings, and by removing operating instruction labelsand eliminating hazardous substances, we have improved overall recyclability. Wehave been able to establish closed recycling technologies that help reduce theproduct’s environmental impact by recycling up to 100% of these plastic housings.Other measures included putting the operating manual on CD-ROM, which led to an80% reduction in the weight of the paper packaged with the BJC-6000. This productclearly exemplifies Canon’s commitment to fostering recycling consciousness.

Environmentally Conscious OA Paper

Eco-Products

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Kenaf Paper (Non-Wood Pulp Paper)Most experts agree that the earth will not have enough conventional wood pulp tomeet worldwide demand for paper in the 21st century. Industry is therefore turning itsattention to kenaf, a material with the potential to become an alternative to wood.Kenaf, a plant that prospers mainly in Southeast Asia, will help protect forests whileoffering higher productivity and absorbing more CO2 than trees. Expectations are highthat kenaf will prove useful in a variety of applications as an environmentally consciousnew resource. Canon took the lead in developing kenafpaper, working on a joint development project with a papermanufacturers to commercialize the world’s first kenaf paperdesigned for high-quality copying. We have also created ahigh-grade 40% compound of kenaf and reclaimed pulp thatoffers users excellent output quality.

Recycled PaperCanon’s recycled paper compounds contain between 70% and 100% reclaimed pulp.We select different types and ratios of reclaimed pulp for a wide variety ofapplications. For example, the whiteness of our high-grade recycled paper is almostindistinguishable from that of new paper, but we also offer paper that is less whiteand which is more suitable to double-sided copying.

Promoting energy conservation in our reclaimed pulpmanufacturing processes, we have achieved a 60%reduction in electricity consumption and cut water use inchemical pulp production by about 30%. Finally, all of ourrecycled paper products are alkaline paper, which is idealfor safely storing documents for long periods of time.

ECF Paper (Pulp Bleaching Method)Paper is typically made with bleached pulp. The most common method used in Japaninvolves oxygen and elementary chlorine. Canon, however, produces its Office Plannerpaper for copying machines and Bubble Jet printers using anelementary chlorine-free (ECF) bleaching method that iscommon in Europe and the United States. This method cutsdown on the usage of chlorine that is thought to beharmful. At the same time, it contributes to environmentalconservation by substantial reduction of chlorine emissionsin wastewater from paper plants.

Helping Preserve Forests and EliminateCO2 and Chlorinated Compounds withThree Kinds of Paper for Office Use

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Environmental Information Disclosureand Communication–Supporting theCreation of a Recycling Society

Eco-Label of the GP405 Digital Copying Machine

Eco-Information Disclosure

● Product Environment OutlineElectricity consumption Standby (Sleep mode): 73W Energy consumption efficiency: 224WhResource efficiency Main body weight: 97.5kg, Main body dimensions (W x D x H): 645mm x 720mm x 689mm

Space required: 1296mm x 720mm, Use of reused parts and recovered material: Using ,Recycling: Operating

Product safety Contained Chemicals: All parts: No use of specific brominated flame retardants (PBB, PBDE)Plastic housing parts: No use of heavy metals (Pb, Hg, Cr(VI), Cd)

Ozone: =< 0.02mg/m3 (Blue Angle Measurement Conditions) Operational sound level: =< 71dB(A) (copying), =< 50dB(A) (standby)

Packaging materials No use of heavy metals (Pb, Hg, Cr (VI), Cd) (box)Recycling: Operating

Complied standard VCCI (Class A) , International Energy Star Program*The Canon Group manufacturer of this product holds ISO 14001 certification.

There is a growing need for corporate activities that address environmental issues and for the personalinvolvement of increased numbers of individuals to realize a recycling society. Canon discloses its products’environmental information by using a new type of eco-label.*

Type III Eco-LabelUnder standards of the International Organization for Standardization (ISO) and developed nations, threetypes of eco-labels are currently in use. Type I eco-labels are the result of third-party certification, while TypeII labels are provided by companies themselves. Type III eco-labels, which Canon has chosen to use, involvethe fuller publicizing of environmental data, which is consistent with the company’s goal of disclosingquantitative data in environmental areas.

Canon’s labels provide qualitative information in 12 areas corresponding to its product environmentoutline, including environment-related information on product usage and recycling, as well as 15 areasrelated to product life cycles and other indicators of eco-efficiency. Information on product life cycles, whichis particularly detailed, is divided into five categories—materials and parts, production, distribution, use andrecycle and disposal.From July 1999, Canon has disclosed the environmental information on one digitalcopying machine model and one Bubble Jet printer. Such disclosure is being made for eight kinds of copyingmachines and 5 kinds of Bubble Jet printers as of May 2000, and we are planning to disclose suchinformation for all the business machines made by Canon from 2001.* Refer to the “Mini-Glossary of Environmental Terms” on page 60.

● Eco-efficiency Mat./parts Production Distribution Use Recycle/Disposal(/unit) (/unit) (/100km) (/10,000sheets) (/unit)

Energy Electricity (kWh) 559 124 0.0 51 1Fossil fuel (conversion to crude oil: L) – 2.6 1.2 0.3 1.2Gas (MJ) – 30.4 0.0 0.0 0.0Other (MJ) – 0.0 0.0 0.0 0.0

Resource Water (Ground water / industrial & city water: L) –/– 57.5/20.2 0.0/0.0 1.1/2.1 0.0/0.0Metal (Ferrous / Non-ferrous: kg) –/– 86.2/3.5 0.0/0.0 0.1/0.0 0.0/0.0Plastic & rubber (kg) – 25.1 0.0 0.6 0.0Glass (kg) – 2.1 0.0 0.0 0.0Others (kg) – 30.6 0.0 0.6 0.0

Environmental Waste (kg) – 1.6 0.0 0.2 1.2safety: Greenhouse gas (CO2 / PFC, HFC, SF6:kg-C) 174.3/– 15.4/0.0 0.9/0.0 6.4/0.0 1.1/0.0

Acidification (SOx, NOx: g) –/– 37.0/43.6 8.7/22.9 11.6/10.7 8.7/22.5Ozone-depleting chemicals (conversion to CFC: g) – 0.0 0.0 0.0 0.0Water effluent (BOD / COD: mg) –/– 405/933 0/0 8/14 0/0

Environmental PRTR listed chemicals (total use: g) – 188.8 0.0 1.7 0.0pollutants

“-” indicates levels currently unknown due to lack of sufficient social infrastructure*disclosed based on the Product Environmental Information Sheet (JEMAI Program Basic Data Sheet)

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Canon has acted in the area of environmental assurance targeting three key issuesas energy conservation, resource conservation, and elimination of hazardoussubstances. In this section, we report the results of 1999 activities focusing on thefive categories that include risk management and recycling in addition to the abovementioned three key issues.

1999 EnvironmentalPerformance Data

Resource Conservation

EnergyConservation

Risk ManagementRecycling

Elimination ofHazardous Substances

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Item

●Operational site: reduce energy consumption to net sales (1990 basis)

●Eliminate use of greenhouse gases (PFCs, HFCs, SF6)

●Reduce final waste material (1990 basis)

1999 Target

27% reduction from the 1990 level

Use of 172 tons (3 substances)

1999 Results

P48

P48

P49

P52

P53

Item 1999 Target

●Reduction of 20% in energy consumption by 2000

● Reduction of 10% in energy consumption (from the 1998 level)

● Limit waste discharge to 227 tons

● Reduce waste by 1.5% or more (from the 1998 level)

● Industrial waste of 73 tons or less

● Total waste discharge of 874 tons or less

● Reduction in water consumption by 10% (from the 1998 level)

1999 Main Targets and Results for Applicable Activities: Overseas Operational SitesA summary of 1999 main targets and results for overseas operational sites’ autonomous activities plans for applicable activities follows.

1999 Results

Achieved 22.3% reduction

Achieved 17% reduction

122.1 tons

Decrease to 2%

47 tons

698 tons

Achieved 20% reduction

Operational Sites

Canon Business Machines, Inc.

Canon Bretagne S.A.

Canon Business Machines, Inc.

Canon Hi-Tech(Thailand)Ltd.

Canon Zhuhai, Inc

Canon Zhuhai, Inc

Canon Bretagne S.A.

Targets and Results

1999 Environmental Performance Data

1999 Group Targets and Results for Applicable Activities: Domestic Operational SitesA summary of 1999 targets and results for domestic operational sites’ autonomous activities plans for applicable activities follows.

● Reduction in use of chemical substances in the pentaprism process by 20% Canon Opto(Malaysia)Sdn.BhdAchieved 41% reduction

Energy conservation/ Global warmingprevention

Resourceconservation

Elimination ofhazardoussubstances

Environmentalmanagementsystem

● Certification under international environmental managementstandards (expand scope beyond manufacturing operationalsites)

● Reduce the release of hazardous chemical substances(1996 basis)

Final waste material volume: 5,651 tons84% reduction from the 1990 level

Discharge volume: 1,471 tons15% reduction from the 1996 level

Introduction at combined R&D /manufacturing sites

Publishing a group report

Disclosure of Type-III eco-labels Disclosed information on copyingmachines and Bubble Jet printers

9% reduction from the 1990 level

Use of 16.2 tons (3 substances)(Elimination complete except forsemicon